As 50% of wealthy Chinese are ready to leave the country, U.S. real estate sector is getting ready

According to a recent survey, Chinese high net worth individuals (HNWIs) – defined as people with US$1.5 million or more in investible assets – more than 50 percent are either planning to, or are considering, emigrating from China.
According to Bain Consulting and China Merchants Bank, there areWealthy Chinese investors- Kushner investments around 1.6 million Chinese with investible assets of $1.5 million or more, up from 180,000 in 2006. (Note: Ask anyone who’s familiar with China and they’ll likely tell you the real figure is far higher than that.)

For Chinese people looking to leave China, the U.S. and Canada are the most popular destinations, followed by the U.K. and Australia.
Cities on the west coast of the U.S. are the preferred emigration destinations for the Chinese. These cities are of course closest to China, increasingly served with regular direct flights and have substantial existing Chinese communities.
If half of U.S. millionaires were looking at leaving the country, clearly we’d want to know why. Education and environment are the primary factors motivating rich Chinese people to leave China.

Chinese political and military elites have long spurned local higher education, instead sending their offspring to study at prestigious western universities for a better education than what’s available at home. The daughter of Chinese President Xi Jinping, for example, studied at Harvard University in the U.S. For reference, in the Times Higher Education 2017 World University Rankings, the first Chinese university is ranked 29th.
Clean air and water, safe food and an open-minded education are attractive to anyone – and especially wealthy Chinese.
In addition, some 84 percent of participants cited the depreciation of the Chinese yuan as a key concern and driver for looking to move and buy real estate abroad.
But there are other reasons that push the wealthy to look overseas. The reality is in China, if you cross the authorities, everything can get pretty bad for you, and quickly. You’ll notice that the top 10 cities listed in the table above are all found in countries with open and transparent rule of law – which is lacking in China.
An overseas exit plan provides an insurance policy, should a swift departure ever need to be made.


According to Pierre Gervois, Founder of the Shanghai Travelers’ Club, an international travel club for Chinese elites, and Publisher of the STC magazine, “Contrary to what Europeans and American analysts think, HNWI Chinese are perfectly aware of China’s economic situation. The myth of a growing and successful China has been carefully entertained by the Chinese government in order to maximize Foreign Direct Investments (FDA’s), but the Chinese elite had never been naive. They know for fifteen year that this growth is not sustainable and it might be time to leave the boat for them and their close family.”

Property prices on the west coast of the U.S. have been boosted, in part, by continued buying by people from China. There have been numerous reports over the years of open houses being completely dominated by Chinese-speaking viewers, and even tour groups focusing on acquiring real estate.
And Chinese students will continue to flock to the U.S., with some 60 percent of all overseas students in the U.S. now hailing from China. Again, Mum and Dad will often buy real estate, along with a degree for junior.
What’s the easiest way for a wealthy Chinese individual to get a green card? Well, as the sister of U.S. President Trump’s son-in-law and special advisor, Jared Kushner, told an audience of Chinese investors in May in Beijing, you just need to invest in a bit of Kushner family real estate development.

The EB-5 visa programme allows for overseas investors to put US$500,000 in projects that create at least 10 jobs (in areas of high unemployment), or a million dollars in other areas, and in return apply for permanent residency in the U.S.
Jared Kushner, prior to his White House role, raised US$50 million from Chinese EB-5 investors for a Trump-branded apartment complex in Jersey City, New Jersey.
Not surprisingly, this has been hugely popular with wealthy Chinese. Around 85 percent of the visas have gone to Chinese, and there is a backlog of more than 20,000 applications.
Although the EB-5 program is likely to be altered or at least reviewed, the U.S. looks set to remain a popular destination for Chinese money for the foreseeable future.

Source: Stansburry Churchouse Research / Business Insider Blog / Tama Churchouse / Chinese Tourists in America Blog

Pierre Gervois: What Chinese Travelers Want

Hospitality guru Pierre Gervois on how to cater to Chinese tourists.

PIerre Gervois TV Interview News China 2016

Chinese billionaires snap up superyachts

yacht-shanghai-travelers-clubSuch is the growing demand in China for superyachts that yacht makers are now starting to install special features that appear to the wealthy Chinese market.
Superyachts have long been a staple for the world’s rich and famous and now, it is China which is snapping up the multi-million pound boats.
In 2013, the British yacht-building company Sunseeker was bought by China’s richest man Wang Jianlin for nearly $500 million.
Since then demand has risen, with more than half of the company’s customers now coming from outside Europe. You’d be forgiven for mistaking this yacht as a designer penthouse. Every gadget and parts in this decadent home, which sleeps 12, are made to the highest luxurious standard.
This is the world of the superyachts – a world the Chinese market is tapping into.
Stewart McIntyre, managing director at Sunseeker, said: “The way the Chinese economy works, they’ve clear got a lot of very, very wealthy people and they’ve got into boat fairly quickly along with other luxury assets like cars, helicopters and private jets.”
At the London Boat Show, there are plenty of high-net worth individuals ready to snap up luxury on the water.
And just like property in London, so many of these superyachts are being sold to customers outside of Britain.
More than a third of Sunseeker’s orders now come from customers outside of the EU and according to a report, yacht sales in China are set to grow 13 per cent from 2012 to 2017.

Such is the growing demand in China for superyachts that yacht makers are now starting to install special features that appear to the wealthy Chinese market.wealthy Chinese - Yacht - China elite focus
Whether it’s a custom made karaoke room or a mahjong table being installed on the upper deck, yacht makers are going the extra mile for the Chinese customer who is spending in excess of $16 million. ” Last year, a reader of the Shanghai Travelers’ Club contacted us discretely because he needed an introduction with a yacht broker to buy a $35 Million yacht. The deal was made less than three days after we gave him the contact. He was in a rush to buy a yacht, but he never explained why. Of course, we never asked.” said Pierre Gervois, CEO of China Elite Focus and Publisher of the Shanghai Travelers’ Club magazine, a luxury travel publication for High Net Worth Chinese

The culture of boating in China is also different, these yachts are not being used to sail the high seas – but instead being used for business and entertaining.
“Apart from boardrooms, karaoke rooms and mahjong rooms on their boats, they like luxury and the like things that are new. They like the latest products, latest materials and latest fabric according to their specifications and their lifestyle,” explained McIntyre.
Despite the growing success in China for British yacht builders, gaining an even stronger foothold will not be easy.
European yacht exporters have to pay a 43 per cent import tax on vessels sold to the mainland. But if the success continues, this slice of British luxury looks set to fill up Hong Kong harbour for some time to come.

Is Louis Vuitton too popular in China?

Being popular is proving to be a bad thing for luxury retailer Louis Vuitton in China. The brand sells so well there, which is its second-largest market in the world, that it is becoming too common.
Lately, instead of China’s wealthy, the middle class has been fueling sales at Louis Vuitton.
There are tens of millions of Chinese women who aspire to buy a Louis Vuitton handbag and millions are actually buying it.
Their desire to save up to buy a Louis Vuitton is becoming a double-edge sword for the brand. It means it will have years of growth there as incomes rise but its mass appeal also risks undermining its exclusive positioning.
The truth is that Chinese High Net Worth Individuals no longer wanted to buy Louis Vuitton. As a woman in Beijing, who is worth billions, said, “Louis Vuitton has become too ordinary. Everyone has it. You see it in every restaurant in Beijing. I prefer Chanel or Bottega Veneta now. They are more exclusive.”
Soaring wealth and obsession with luxury products provides huge opportunities for luxury retailers. The number of Chinese millionaires are estimated to more than double in the next five years. According to the Shanghai Travelers’ Club, a luxury travel club for Chinese billionaires, 200,000 Chinese travelers in 2010 had the ability to spend more than $150,000 in shopping abroad during their leisure trip.
These super rich Chinese consumers are causing challenges for Louis Vuitton and other historically dominant players like Zegna and Omega to maintain market share because the truly wealthy no longer want to buy the same fashion brands everyone else has.
Wealthy consumers looking to differentiate from the masses provide an opportunity for luxury brands like Chloe, Hermes, and Patek Philippe that target the ultra rich. They are moving more towards inconspicuous consumption in handbags and apparel while becoming more flamboyant in auto purchases and jewelry to show status, which is why sales there of Ferraris and Lamborghinis are soaring.
One wealthy man in Beijing told me, “Everyone can buy Louis Vuitton now, but not many can buy a Bentley.”
To stave off competition from very exclusive brands, and premium brands like Coach , Louis Vuitton is going to have to spend more on marketing to maintain its exclusivity. So far it has kept ahead of the curve, launching multi-story flagship stores in key shopping areas and marketing initiatives in conjunction with the Beijing National Museum.
Celebrity endorsers like Angelina Jolie also help add luster. These initiatives are key to maintaining status but will become increasingly costly, squeezing margins, as rent and labor costs go up.
Louis Vuitton’s parent group, LVMH , should consider more acquisitions at the higher end to capture wealthy consumers tiring of its flagship brand. It has bought stakes in Hermes but should try buying high-end brands outright to capture the truly wealthy segment.
China is the market to win for luxury brands. Despite the rocky global economy the demand for luxury products continues to soar. Brands need to understand that China’s ultra wealthy are becoming more sophisticated and not just looking for flashy logos and brands that everyone has. Brands also need to understand that buying abroad in New York City, London or Paris is a true sign of social status for Chinese consumers: Buying in Shanghai or in Beijing shopping malls is not “cool” anymore for Chinese: It just show that you can’t afford to travel.  At the uber rich level, there exists the opportunity to capture market share by differentiating the brand. Three years ago, everyone wanted Louis Vuitton. That is no longer the case.

Burberry plans to expand London stores, mostly for the Chinese customers

Burberry said it would pump £20m into stores in London this year as the capital cements its reputation as a shopping magnet for high-spending Chinese tourists.

The luxury label’s chief executive, Angela Ahrendts, said trading in London had been one of the highlights of a “record” year for the British trenchcoat-maker, with profits up nearly 40% at £298m. It plans to double its selling space in London, a move which will involve the expansion of its store near Harrods in upmarket Knightsbridge, as well as a move to a larger shop on Regent Street which Ahrendts said was now in the same league as the “Champs Elysées or Fifth Avenue” on the global shopping map. “This is our headquarters,” she said. “We should shine here greater than anywhere in the world.” “We are already the favorite store of the Shanghai Travelers’ Club members, that means a lot to us”.

Sales in the luxury goods industry have bounced back after the two-year hiatus caused by the financial crisis. Sales at Burberry were up 27% to £1.5bn as wealthy shoppers regained their appetite for designer clothes and expensive handbags such as the £2,500 python-skin tote in its current collection. Demand for its catwalk brand Prorsum had “come back”, she said, while sales of accessories were up 35%.

Under the leadership of Ahrendts, a glamorous American who joined from US clothing giant Liz Claiborne five years ago, the brand has shed its reliance on raincoats and its trademark camel, red and black check to become a bona fide luxury brand with advertising campaigns featuring young actresses such as Harry Potter star Emma Watson helping to establish its fashion kudos. Ahrendts has also pulled the 155-year-old brand started by Thomas Burberry into the 21st century by broadcasting its runway shows in 3D live on the internet and launching several spin-off websites, including Art of the Trench.

During the year Asia-Pacific became the brand’s most important sales region, with growth of 53%. Asian tourists, predominantly from China, are also Burberry’s biggest customers in major tourist cities, such as Paris, New York and London – so much so that it now hires Mandarin-speaking shop assistants. Chinese visitors to London last year spent an estimated £200m in luxury shopping areas such as Bond Street and Savile Row, according to retail industry group the New West End Company.

US retail consultancy Bain is predicting a strong year for luxury goods brands, with sales expected to grow 8% to £160bn. Until now Ahrendts has been investing in behind-the-scenes improvements such as Burberry’s IT systems but she said it was time for it to increase its retail presence: “It is time to get our retail footprint up to par with consumers’ perception of the brand.”

The decision will see capital expenditure double to £200m this year, with half that spent on new shops, including 20 in emerging markets such as Brazil, India and Mexico and the rest on refurbishments in cities such as Chicago, Milan, Hong Kong and Paris.

Burberry’s shares have soared in the past year but investors are worried about the impact of the stores push on profits, sending the shares down more than 4% to make it the biggest faller in the FTSE 100. They closed down 60p at £12.60.

Richard Hunter, head of UK equities at Hargreaves Lansdown, put the fall down to profit-taking, noting the shares had risen 116% in the last year. “Burberry remains a rare and notable example of a retailer enjoying a stellar growth trajectory,” he said, adding the “downside” was spending on new stores would “pinch” profit margins over the coming year.

Chinese investors love London Luxury properties

Naomi Minegishi, 21, a Japanese woman who lived in China for 10 years, recently took a job with the London property broker Felicity J Lord.
Nick Vestey, of Knight Frank in Knightsbridge, at a five-bedroom house he sold to a Chinese investor for more than $26 million. per oanda conversion
Ms. Minegishi was hired not for her experience in real estate sales — she is studying management at a London university — but for her language ability. She is fluent in Mandarin, an increasingly valuable skill in London’s residential real estate market.
With her help, the agency recently sold four three-bedroom apartments in a new development for £320,000, about $500,000, each to a different Chinese buyer and solely on the basis of photos and floor plans. The new construction is close to the Olympic stadium, and the investors are betting that real estate prices will rise before the Games in 2012.
Chinese clients are a dream, Ms. Minegishi said. “They are wealthy, they pay in cash, and they’re looking for good value.”
Chinese citizens require approval from their local authorities to invest more than the equivalent of $50,000 a year overseas. But many wealthy Chinese elude the restrictions with help from trust funds and foreign bank accounts, real estate brokers say.
The London property market might have shown signs of cooling recently, but investors from mainland China and Hong Kong are busier than ever — bidding, for example, on luxury apartments in the fashionable Knightsbridge district down the road from Harrods department store and on new homes near the Canary Wharf financial district.
In some parts of London, mainland Chinese investors have already replaced those from Russia and the Middle East as the busiest real estate buyers with deep pockets, looking for trophy assets and pushing up prices, some brokers say.
Buyers from mainland China are a tiny portion of purchasers of high-end real estate in London, accounting for 5 percent of all purchases by foreigners of London properties valued from £500,000 to £1 million this year. But they are a growing presence. They accounted for less than 1 percent of purchases in that price range last year, according to Savills, a real estate agency.
Europeans still make up the largest portion, Savills says, although it does not break down buyers by country.
Unlike clients from Russia and the Middle East, however, few Chinese buyers are looking for London apartments to live in themselves. A majority of them are seeking investments in a real estate market they perceive as more stable than their own and are planning to receive steady rental income for years, Ms. Minegishi said.
For wealthy Asians, fears that governments may impose more constraints on red-hot local property markets back home have made investments abroad more attractive.
Rapid economic growth and easy credit caused real estate prices in many parts of Asia to rise sharply late last year. In Hong Kong, for example, prices for luxury homes have jumped 45 percent since 2009, according to Savills.

Not surprisingly, the property industry in Britain is adapting to meet the Chinese demand. Brokers are hiring Mandarin speakers like Ms. Minegishi, as well as Cantonese speakers to cater to people from Hong Kong.
Savills organized a seminar in Shanghai in July to teach 100 clients how to buy real estate in London. A rival agency, Hamptons International, opened an office in Hong Kong with four employees about two months ago.
Some London developers, meanwhile, are omitting the number four in new buildings because it is considered unlucky in Chinese culture.
“Most developers in London are including China in their marketing efforts,” said Matthew Tack, a director at Hamptons in London. “They’d be silly not to.”
The increase in transactions highlights a gradual shift in wealth to Asia, including mainland China. Free of the debt levels that still haunt Western households and governments, much of Asia began to recover rapidly from the global economic downturn last year.
And although a large majority of Asians still struggle to make ends meet, the booming growth has catapulted many into the ranks of the wealthy and superwealthy.
In mainland China alone, the number of people with assets worth more than 10 million renminbi, or $1.5 million, rose 6.1 percent, to 875,000, in a year.

Then there are the fabulously wealthy, like Joseph Lau, a Hong Kong real estate billionaire who recently spent £33 million on a six-floor mansion in Eaton Square in London, an address he shares with the Russian oligarch Roman A. Abramovich.
Even Shanghai Luxury clubs, such as the prestigious Shanghai Travelers’ Club, organize their own “Luxury Real Estate tours” in London for their wealthy members.
More typical, though, are Asian buyers spending £1 million or less. Because of China’s restrictions on overseas investments, most of the Chinese buyers pay cash to minimize the paper trail. None of the London brokers interviewed for this article were willing to disclose the identities of buyers or introduce them to a reporter.
Although Chinese are becoming more active in many overseas real estate markets, including the United States and Continental Europe, London remains highly popular for a variety of reasons, brokers say. Britain has almost no restrictions on whether foreigners can own real estate, and a fairly fluid rental market, which is attractive to buyers seeking income from their properties.

Cultural issues, especially the Chinese emphasis on education, also favor the acquisition of London addresses.
Education is generally the largest budget item in a Chinese household, and many families hope to send their children to elite universities in Britain, which tend to admit more foreign students than top universities in the United States, said Jeff Cao, head of the China sector for Think London, a government-supported agency that helps attract foreign investment to the city.
The number of Chinese students at London universities rose 9 percent, to 948, last year from 867 a year earlier, according to the Universities and Colleges Admissions Service.
For some Chinese buyers in London, Mr. Cao said, the idea is to find apartments big enough to provide the children with more comfortable accommodations than student dormitories and that have spare rooms that can be rented out. Once the children graduate, their parents aim to rent out the whole apartment.
One mainland Chinese investor who owns real estate in London and elsewhere said his London investments were his most lucrative.
“I bought a flat for my daughter’s use when she was studying in London and other flats I have rented out or sold,” Mr. Lai, the owner, who declined to give his first name to protect his privacy, wrote by e-mail.
“The U.K. traditionally has a very good legal structure with good law and order,” Mr. Lai wrote. “That, together with the city’s financial institutions and the British people’s love for owning their own homes, makes the property market extremely attractive.”

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